Homeowners insurance deductibles are an important part of figuring out how to choose homeowners insurance.
A homeowners insurance deductible decides how much you pay when you file a claim. The deductible affects your insurance policy’s cost. Typically, the higher your homeowners insurance deductible, the lower your premium. However, a lower deductible means you’ll pay more in premiums.
So it's essential to recognize the trade-off and choose a homeowners insurance deductible that makes sense for you and your finances.
- How does home insurance deductibles work?
- Types of homeowners insurance deductibles
- When do you pay the deductible for homeowners insurance?
- Homeowners insurance disaster deductibles
- Home insurance deductible calculator
- What is the standard deductible for homeowners insurance?
- What’s the right home insurance deductible?
- How much do home insurance claims increase rates?
- Shopping around can provide the real savings
How does home insurance deductibles work?
A home insurance deductible is the amount a homeowner must pay toward a claim before the insurer pays its part.
Some home insurance policies have a percentage deductible. Percentage deductibles makes policyholders responsible for paying a certain percentage of your policy rather than a set amount of money.
Let's look at a dollar-amount example:
- Suppose you have a $500 deductible.
- A fire causes $12,000 worth of damage.
- In that case, you would pay $500 and the insurer would pick up the remaining $11,500.
- If your home suffers $500 in damage or less, your insurer won’t pay anything. Instead, you’d pay for all of the repairs. In this case, you shouldn't even file a claim.
The same homeowners insurance deductible amount (sometimes referred to as an “all-peril” deductible) applies to most property claims, whether it’s damage, theft, fire or burst pipes. Other types of home insurance claims, such as ones against your liability coverage or guest medical, rarely come with deductibles attached.
Types of homeowners insurance deductibles
A deductible is the amount you pay when you file a claim, but there isn't just one type of deductible. There are three main types of homeowners insurance deductibles that figure out what you're responsible for paying:
A dollar amount – Your deductible is a specific amount that you must pay before your insurer pays its portion. For example, you have a small kitchen fire and the damages are $3,000. If your deductible is $1,000, you pay that amount and your homeowners insurance company takes care of the remaining $2,000.
A percentage -- Percentage-based is when your deductible is a percentage of your insurance policy’s total coverage amount. So, if your home is insured for $200,000 and your deductible is 2%, you'd have to pay the first $4,000 of any claim (2% of $200,000 = $4,000).
A split -- This is a hybrid of the first two. A dollar amount applies to most claims, but a percentage can be triggered by certain events, such as a hurricane or earthquake (see below).
When do you pay the deductible for homeowners insurance?
Homeowners insurance deductibles apply to every claim, regardless of how many you make during a year. In that way, it’s similar to an auto insurance deductible.
So, if you live in a place that's particularly prone to risks, you may have to raid your savings multiple times each year. Those additional risks include tornadoes, hurricanes and earthquakes.There's good news if you live in Florida, though. The law there allows only one deductible each hurricane season for that particular risk.
Auto and home insurance deductibles are different from health plans. Generally, health insurance has an annual deductible, and, once you've reached that amount of money, the insurance company pays for everything else that year, subject to co-payments and co-insurance.
Homeowners insurance disaster deductibles
Insurers often try to protect themselves against major disaster claims. They can do that by imposing or encouraging high deductibles that apply only to those exceptional risks.
Earthquakes
Earthquakes aren't covered under standard insurance policies -- even if you live in areas prone to them. Instead, earthquake insurance is obtained with a separate insurance policy or an endorsement. One part of the policy is for the dwelling and another covers personal property. There is normally a deductible and limit assigned to each portion.
For example:
- If an earthquake damaged your house and you had $300,000 worth of dwelling coverage with a structure deductible of 20%, you would pay $60,000.
- After that amount is deducted, your insurance company would pay the remaining $240,000.
- If your personal property limit was $50,000 with a 10% deductible and you claimed that full amount, $5,000 would be deducted from the settlement.
The California Earthquake Authority (CEA) offers coverage to California residents. A standard CEA policy in California includes a 15% deductible. However, its “Homeowners Choice” insurance policy lets you choose separate coverage for dwellings and personal property with different deductibles.
For other parts of the nation, deductibles typically range from 5% to 20% of your replacement cost of the structure covered. However, it’s typical for insurance companies in high-risk areas to insist you have a deductible of at least 10%.
According to the Insurance Information Institute (III), that's commonly the case in Nevada, Utah and Washington. But that 10% wouldn't apply to all claims -- only to those arising from an earthquake. That's the split deductibles that we mentioned above.
Hurricanes, wind/hail and flooding
The situation is generally similar for hurricane and wind/hail deductibles. Hurricane deductibles apply to damage solely from hurricanes. Windstorm or wind/hail deductibles apply to wind damage.
The III reports that percentage-based deductibles typically apply to these coverages and run from 1% to 5% of the home’s insured value. Some states give homeowners the option of paying a higher premium to carry a traditional dollar deductible. This is seldom allowed, though, if you live in a coastal area.
Depending on your state's law and your insurer's protocols, a hurricane deductible may only apply once the National Weather Service designates a tropical storm as a hurricane or reports a particular wind-speed threshold. The only way you can be sure of the factor that triggers your exceptional deductible is to check your insurance policy or talk to your insurance company.
The III lists 20 states, plus the District of Columbia, that have hurricane deductibles:
- Alabama
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Hawaii
- Louisiana
- Maine
- Maryland
- Massachusetts
- Mississippi
- New Jersey
- New York
- North Carolina
- Pennsylvania
- Rhode Island
- South Carolina
- Texas
- Virginia
Discover more at Hurricanes and home insurance guide.
Flooding is a special case. That’s not covered by standard homeowners insurance. You can ask your insurance company whether it offers coverage for this additional risk or buy protection from the federal government's National Flood Insurance Program (NFIP). Flood deductibles under NFIP plans range from $1,000 to $10,000.
Read more about flood insurance.
Home insurance deductible calculator
The best deductible for homeowners insurance often depends on your financial situation.
Insurance companies use deductibles to reduce minor claims -- and lowers payouts on major claims. Taking on less risk allows insurance companies to reduce your premiums when you choose a higher deductible amount. High deductible insurance can reduce your payments by between 20% and 40% depending on your insurance company and coverage.
An Insurance.com rate analysis of how much you can save in every state by hiking your homeowners deductible shows homeowners can trim an average of $260 off their premium by increasing a $500 deductible to $2,500.
Florida homeowners, who pay the most for home insurance nationwide, save the most by increasing their deductibles from $500 to $2,500. They can save an average of $675 each year. Those in Idaho, the third-cheapest state for home insurance, would save the least ($96), according to Insurance.com’s analysis.
Most insurance companies impose a minimum deductible but allow you to increase it in exchange for lower premiums. A lower deductible can be an attractive deal if you couldn't afford more than $1,000 if you had to file a claim.
On the other hand, you may prefer a high deductible, such as more than $1,000, if you want to pay cheaper insurance premiums.
The following data give you an idea of what you save on a premium by raising your deductible. Here are rates for capital cities in Alabama, California, Colorado, Florida, Kansas, New Hampshire, New York, Ohio, Texas, Virginia and Washington, representing various regions of the country. The coverage level is $300,000 for property and $100,000 for liability.
Annual premium by deductible amount
| State and capital | Insurance Company | $500 | $1,000 | $1,500 | $2,000 | $2,500 | Savings from $500 to $2500 deductible |
|---|---|---|---|---|---|---|---|
| Sacramento, California | Allstate | $1,169 | $997 | $997 | $825 | $825 | $344 or 42% |
| Sacramento, California | Fire Insurance Exchange | $2,210 | $2,035 | $1,859 | $1,618 | $1,618 | $592 or 37% |
| Sacramento, California | Liberty Mutual | $1,817 | $1,622 | $1,622 | $1,426 | $1,426 | $391 or 27% |
| Sacramento, California | Mercury | $679 | $575 | $575 | $471 | $471 | $208 or 44% |
| Sacramento, California | State Farm | $1,150 | $1,150 | $1,063 | $1,024 | $976 | $174 or 18% |
| Sacramento, California | Travelers | $858 | $771 | $728 | $618 | $618 | $240 or 39% |
| Montgomery, Alabama | Alfa Mutual Insurance | $2,562 | $2,246 | $2,020 | $1,972 | $1,972 | $590 or 30% |
| Montgomery, Alabama | Allstate | $3,651 | $3,016 | $2,991 | $2,976 | $3,001 | $650 or 22% |
| Montgomery, Alabama | Foremost Insurance | $2,198 | $2,108 | $2,108 | $2,018 | $2,018 | $180 or 9% |
| Montgomery, Alabama | Liberty Mutual | $3,538 | $3,120 | $3,120 | $3,076 | $3,076 | $462 or 15% |
| Montgomery, Alabama | State Farm | $2,747 | $2,747 | $2,459 | $2,459 | $2,281 | $466 or 20% |
| Montgomery, Alabama | Travelers | $1,858 | $1,829 | $1,807 | $1,775 | $1,775 | $83 or 5% |
| Montgomery, Alabama | United Service Automobile | $1,314 | $1,275 | $1,214 | $1,214 | $1,214 | $100 or 8% |
| Albany, New York | Allstate | $1,509 | $1,305 | $1,209 | $1,209 | $1,140 | $369 or 32% |
| Albany, New York | Liberty Mutual | $2,013 | $1,685 | $1,685 | $1,574 | $1,574 | $439 or 28% |
| Albany, New York | New York Central Mutual | $769 | $670 | $637 | $597 | $597 | $172 or 29% |
| Albany, New York | State Farm | $942 | $851 | $778 | $762 | $739 | $203 or 27% |
| Albany, New York | Travco Insurance | $1,148 | $1,021 | $1,021 | $883 | $883 | $265 or 30% |
| Denver, Colorado | Allstate | $3,413 | $3,132 | $2,900 | $2,703 | $2,408 | $1,005 or 42% |
| Denver, Colorado | American Family | $2,101 | $1,892 | $1,808 | $1,723 | $1,682 | $419 or 25% |
| Denver, Colorado | Farmers Insurance | $3,782 | $3,455 | $2,926 | $1,287 | $2,575 | $1,207 or 47% |
| Denver, Colorado | Safeco | $1,839 | $1,764 | $1,712 | $1,663 | $1,617 | $222 or 14% |
| Denver, Colorado | State Farm | $1,982 | $1,982 | $1,982 | $1,982 | $1,982 | $0 |
| Denver, Colorado | Travelers | $2,518 | $2,353 | $2,251 | $2,066 | $2,066 | $452 or 22% |
| Denver, Colorado | USAA | $2,199 | $1,898 | $1,419 | $1,419 | $1,419 | $780 or 55% |
| Topeka, Kansas | Allstate | $2,743 | $2,524 | $2,348 | $2,081 | $2,081 | $662 or 32% |
| Topeka, Kansas | American Family | $2,715 | $2,382 | $2,239 | $2,096 | $1,954 | $761 or 39% |
| Topeka, Kansas | Farm Bureau | $2,845 | $2,180 | $2,050 | $1,904 | $1,769 | $1,076 or 61% |
| Topeka, Kansas | Farmers Insurance | $2,501 | $2,292 | $2,116 | $1,849 | $1,737 | $764 or 44% |
| Topeka, Kansas | Safeco | $2,090 | $2,017 | $1,965 | $1,917 | $1,873 | $217 or 12% |
| Topeka, Kansas | State Farm | $2,261 | $2,261 | $2,261 | $2,056 | $2,056 | $205 or 10% |
| Topeka, Kansas | Travelers | $4,630 | $4,366 | $3,776 | $3,466 | $3,466 | $1,164 or 34% |
| Columbus, Ohio | Allstate | $1,011 | $954 | $878 | $849 | $838 | $173 or 21% |
| Columbus, Ohio | American Family | $1,345 | $1,259 | $1,221 | $1,183 | $1,145 | $200 or 17% |
| Columbus, Ohio | Cincinnati Insurance | $916 | $871 | $844 | $817 | $789 | $127 or 16% |
| Columbus, Ohio | Erie Insurance | $1,122 | $985 | $870 | $700 | $700 | $422 or 60% |
| Columbus, Ohio | Farmers | $1,067 | $982 | $877 | $791 | $791 | $276 or 35% |
| Columbus, Ohio | Liberty Mutual | $1,428 | $1,130 | $1,130 | $1,045 | $1,045 | $383 or 37% |
| Columbus, Ohio | Nationwide | $1,349 | $1,162 | $1,088 | $1,006 | $1,006 | $343 or 34% |
| Columbus, Ohio | State Farm | $1,857 | $1,857 | $1,658 | $1,658 | $1,536 | $321 or 21% |
| Columbus, Ohio | Travelers | $1,258 | $1,026 | $1,026 | $945 | $945 | $313 or 33% |
| Richmond, Virginia | Erie Insurance | $2,284 | $2,039 | $2,019 | $1,994 | $1,974 | $310 or 16% |
| Richmond, Virginia | Farmers Insurance | $1,201 | $1,073 | $964 | $871 | $795 | $406 or 51% |
| Richmond, Virginia | Liberty Insurance | $2,304 | $2,112 | $2,112 | $1,878 | $1,878 | $426 or 23% |
| Richmond, Virginia | Nationwide | $1,448 | $1,075 | $1,075 | $962 | $962 | $486 or 51% |
| Richmond, Virginia | State Farm | $1,551 | $1,392 | $1,519 | $1,307 | $1,307 | $244 or 19% |
| Richmond, Virginia | Travco | $1,449 | $1,449 | $1,325 | $1,302 | $1,212 | $237 or 20% |
| Richmond, Virginia | USAA | $1,051 | $979 | $929 | $857 | $857 | $194 or 23% |
| Richmond, Virginia | Allstate | $1,010 | $968 | $889 | $889 | $889 | $121 or 14% |
| Tallahassee, Florida | Castle Key Insurance | $1,122 | $1,051 | $1,051 | $1,051 | $1,051 | $71 or 7% |
| Tallahassee, Florida | Florida Peninsula Insurance | $1,654 | $1,512 | $1,512 | $1,406 | $1,406 | $248 or 18% |
| Tallahassee, Florida | State Farm | $2,640 | $2,261 | $1,882 | $1,882 | $1,715 | $925 or 54% |
| Tallahassee, Florida | First Floridian | $1,372 | $1,325 | $1,325 | $1,220 | $1,220 | $152 or 12% |
| Tallahassee, Florida | United | $1,833 | $1,654 | $1,654 | $1,410 | $1,410 | $423 or 30% |
| Tallahassee, Florida | Universal | $2,085 | $1,865 | $1,865 | $1,700 | $1,700 | $385 or 23% |
| Tallahassee, Florida | USAA | $2,144 | $2,044 | $1,965 | $1,965 | $1,965 | $179 or 9% |
| Austin, Texas | Allstate | $2,563 | $2,345 | $2,229 | $2,229 | $2,024 | $539 or 27% |
| Austin, Texas | Safeco | $908 | $866 | $836 | $808 | $782 | $126 or 16% |
| Austin, Texas | Texas Farmers | $1,486 | $1,453 | $1,425 | $1,405 | $1,091 | $395 or 36% |
| Austin, Texas | Travelers | $1,122 | $1,031 | $966 | $871 | $871 | $251 or 29% |
| Austin, Texas | USAA | $1,279 | $1,231 | $1,149 | $1,149 | $1,149 | $130 or 11% |
| Concord, New Hampshire | Concord General | $841 | $587 | $466 | $435 | $541 | $300 or 55% |
| Concord, New Hampshire | Liberty Mutual | $785 | $700 | $661 | $589 | $589 | $196 or 33% |
| Concord, New Hampshire | State Farm | $1,054 | $796 | $796 | $531 | $531 | $523 or 98% |
| Concord, New Hampshire | Travelers | $1,833 | $1,561 | $1,561 | $1,357 | $1,357 | $476 or 35% |
| Concord, New Hampshire | Vermont Mutual | $1,269 | $1,269 | $1,150 | $1,125 | $1,125 | $144 or 13% |
| Concord, New Hampshire | Allstate | $750 | $721 | $698 | $660 | $660 | $90 or 14% |
| Concord, New Hampshire | Amica | $816 | $679 | $679 | $644 | $644 | $172 or 27% |
| Olympia, Washington | Allstate | $684 | $647 | $617 | $592 | $555 | $129 or 23% |
| Olympia, Washington | American Family | $832 | $737 | $700 | $664 | $635 | $197 or 31% |
| Olympia, Washington | Farmers | $1,194 | $1,133 | $1,133 | $976 | $976 | $218 or 22% |
| Olympia, Washington | Pemco | $788 | $674 | $638 | $569 | $569 | $219 or 38% |
| Olympia, Washington | Safeco | $791 | $736 | $736 | $667 | $667 | $124 or 19% |
| Olympia, Washington | State Farm | $1,186 | $1,186 | $1,034 | $1,034 | $958 | $228 or 24% |
| Olympia, Washington | Travelers | $732 | $693 | $662 | $613 | $613 | $119 or 19% |
| Olympia, Washington | USAA | $766 | $710 | $609 | $609 | $609 | $157 or 26% |
You can choose among six deductible amounts when using Insurance.com's average home insurance rate by ZIP code tool to see how premiumms compare based on deductible, dwelling and liability amounts.
What is the standard deductible for homeowners insurance?
The average homeowners insurance deductible is $500.
“Not all that long ago, a $100 deductible was the standard deductible amount, but in keeping with inflation, the standard moved to $250. As property claims started to escalate and new coverages were developed, it wasn’t long until $500 became the new standard,” said P.J. Miller, insurance agent, Wallace & Turner Insurance in Springfield, Ohio.
Miller added that many insurance companies also offer disappearing deductibles. In those cases, companies reduce your deductibles if you don't file a claim over a period. So, your $500 deductible may shrink to $100 if you don't make a claim in three years.
Miller said some insurers have also attached higher deductibles to roof claims. Insurance companies usually want homeowners to replace their roofs after 20 or 30 years. Roofs protect the homes against the elements. Home insurance companies often check a home’s roof to make sure it’s in working order.
Miller said insurers have increasingly attached a higher deductible for roof damage as wind and hail claims have increased in recent years.
What’s the right home insurance deductible?
The homeowners insurance deductible that’s right for you depends on your financial situation.
“Go with the highest deductible you’re comfortable with, whether that’s psychologically or monetarily,” Miller said. “And don’t think about it on a one-year basis as that tends to skew the thinking because you want to reduce your homeowner premium as much as possible over the course of your homeownership. A substantial deductible like $1,000 or $2,500 might save you $100 or even $200 to $300 or more on an annual basis, and after five years, you’ve put a dent in that homeowner premium.”
Here are some scenarios to help you figure out which deductible to choose:
You're well off or comfortable
It doesn't matter so much to someone with a high income whether they pay higher premiums for low deductibles or lower premiums for high ones.
For this category, the choice is a mathematical one, based on the dollar amount you can save through lower premiums against your assessment of the likelihood that you’ll have to make one or more claims and pay the deductibles.
If you get the calculation wrong, the result is irritation rather than devastation.
You're struggling financially
Things are very different for those who are worse off. People who have little spare money have the greatest need for lower premiums, but least able to meet their obligations to pay a home insurance deductible when a claim arises -- or multiple deductibles if there are multiple claims in a year.
If you lack an emergency fund, you may feel more comfortable having higher deductibles if you first put in place access to borrowing. This could be a home equity line of credit (HELOC), a personal line of credit (which isn't secured on your home) or even a credit card with a significant, unused credit limit.
However, borrowing in these circumstances is far from desirable and should be regarded as a (sometimes) necessary evil.
You're financially stable but not well off
If you’re part of the middle class, you need to look at your own finances and determine what deductible is best for you.
What can you afford out of pocket? Is a $1,000 deductible doable, but $2,500 a stretch for your savings? In that case, choose the $1,000 deductible. You won’t save as much as if you pick the highest deductible, but you’ll still feel good knowing you are saving some money in a lower premium.
You may even want to put aside some money each check to build up more savings so you can go with a higher deductible. That can save you hundreds each year.
How much do home insurance claims increase rates?
One of the biggest indicators of risk used by insurers when they calculate your premium is your record, incluidng how often you file a claim. Statistically, if you've made claims in the past, you're more likely to do so again.
So, after you file a claim, your homeowners insurance company may raise your premium when you look to renew. And that just might see you ultimately paying more than if you hadn't reported the loss in the first place.
Here are the top 10 average home insurance percentage increases based on claims:
- Filing a second fire claim -- 44%
- Filing a second liability claim -- 39%
- Filing a second theft claim -- 38%
- Filing a second water claim -- 33%
- Filing a fire claim -- 20%
- Filing a liability claim -- 19%
- Filing a theft claim -- 19%
- Filing a water claim -- 16%
- Filing a weather claim -- 16%
- Filing a second medical claim -- 13%
So, beware of potential rate increases after you make a claim.
Shopping around can provide the real savings
Insurance companies can dazzle you with apparently generous savings for deductibles. But, just as with all discounts, those savings may not be as attractive as they first seem.
The only way you can be sure you're getting the best deal is to shop around for competitive quotes every time you renew or amend your policy. Check out the best homeowners insurance companies. Know what homeowners insurance discounts to ask about and be aware of the key factors that affect homeowners insurance rates. Also, get quotes for multiple deductible levels to see what's the best deal for you.